Accounting 9706/22 May/June 2026: question paper and mark scheme

Mark scheme

1(a) Calculate the total revenue of the business for the year ended 31 December 2025. 7 $ Closing balance credit customers 8 320 (1) Less opening balance credit customers (4 940) (1) 3 380 Receipts 47 580 (1) Discounts allowed W1 305 (1) Irrecoverable debt written off 145 (1) Cash receipts 14 800 (1) Total revenue 66 210 (1) OF Refer to workings if incorrect final answer and ignore labels. W1 Discounts allowed: $47 580 × ¼ = $11 895 represents 97.5% of settlement; discount = 2.5/97.5 × $11 895 = $305 (1) Alternative approach Balance b/d 4 940 (1) Bank 47 580 (1) Sales 51 410 Discounts allowed 305 (1) Irrecoverable debt 145 (1) Balance c/d 8 320 (1) 56 350 56 350 51 410 (OF) + 14 800 (1) = 66 210 (1)OF 1(b) Calculate the amount of cash stolen. 3 $ $ Total receipts (11800+80) 11 880 Total payments (11 170) (5800+1050+4320) 710 (1)* Increase in cash balance (350) (1) Stolen cash 360 (1) Trace ID: PC-6E0F8091AC Re-uploading, mirroring or re-hosting this file on any other website or domain is unauthorised and traceable. Licensed for hosting on papacambridge.com only. PapaCambridge Downloaded from PapaCambridge - https://papacambridge.com/ 1(c) Calculate the profit or loss made on the disposal of motor vehicle A. 3 Carrying value of vehicle at time of disposal: $32 000 less depreciation ((2 × 20% × $32 000) + (20% × 32 000 × 9/12)) = $14 400 (1) Disposal: $14 400 – $16 300 = $1 900 (1) profit (1) Alternative approach Cost 32 000} Depreciation 17 600} (1) Statement of profit 1 900 (1) Bank 16 300 or loss (1) 33 900 33 900 Trace ID: PC-6E0F8091AC Re-uploading, mirroring or re-hosting this file on any other website or domain is unauthorised and traceable. Licensed for hosting on papacambridge.com only. PapaCambridge Downloaded from PapaCambridge - https://papacambridge.com/ 1(d) Prepare the statement of profit or loss for the year ended 31 December 2025. 12 Airport Transfers Statement of profit or loss for the year ended 31 December 2025 $ $ Revenue from 1(a) 66 210 (1) OF Irrecoverable debt recovered 80 (1) Profit/gain on disposal of motor vehicle 1 900 (1) OF from 1(c) 68 190 Less expenses Irrecoverable debt (written off) 145 (1) Discounts allowed 305 (1) Wages of office assistant 5 800 Depreciation of equipment 380 (1) Depreciation of motor vehicles W1 13 900 (1) Uninsured loss of cash/stolen cash 360 (1) OF from 1(b) General expenses W2 12 370 (1) Rent W3 5 690 (1) Wages of drivers W4 20 010 (1) 58 960 Profit for the year 9 230 (1) OF W1 Depreciation of vehicles: Vehicle A, $4 800 Vehicle B, 20% × $36 000 = $7 200; Vehicle C, 20% × ¼ × $38 000 = $1 900, i.e. $13 900 W2 General expenses: $11 320 + $1 050 = 12 370 W3 Rent: $6 200 – $510 = $5 690 W4 Wages of drivers: $18 860 + closing owing $1 150 = $20 010 Trace ID: PC-6E0F8091AC Re-uploading, mirroring or re-hosting this file on any other website or domain is unauthorised and traceable. Licensed for hosting on papacambridge.com only. PapaCambridge Downloaded from PapaCambridge - https://papacambridge.com/ 1(e) Advise Zahir whether or not he should introduce a computerised system of 5 accounting. Justify your answer by considering the advantages and disadvantages of this proposal. Advantages (max 2) May reduce late payments if reminders are issued using the credit control system (1) May reduce likelihood of irrecoverable debts (1) Can track customers and improve credit control (1) Improved liquidity and profits (1) Speed/efficiency/time saving of processing information (1) Automatic provision of reports or financial statements (1) Potential for additional useful features: payroll/inventory control (1) Accuracy/less errors of records (1) Space can be saved/less paper used/large amount of data stored (1) Production of business documents e.g. invoices and statements of accounts (1) Auditing and fraud prevention (1) Records/data are more secure (using passwords/back-ups) (1) (Balances are) up to date (1) Disadvantages (max 2) No guarantee that system will improve situation/reminders could be ignored (1) Cost of capital equipment/setting up/capital expenditure (1) Cost of software package/updating/maintenance (1) Lack of experience/training required (1) Data security risks/hacking/cyber-attacks/virus (1) Systems crashing/loss of data (1) Employee resistance (1) Decision supported with a comment (1)

Mark scheme

2(a)(i) Calculate the following for the year ended 31 December 2024. 1 cost of sales 60% × $240 000 = $144 000 (1) 2(a)(ii) purchases 2 Cost of sales $144 000 from 2(a)(i) (1) OF + closing inventory $19 600 – opening inventory $16 400 = $147 200 (1) OF 2(b) Calculate the trade payables turnover (days) for the year ended 31 December 2 2024, stating the formula used. formula calculation trade payables $14 400 × 365 (1) × 365 = 36 days (1)OF card purchases $147 200 OF Trace ID: PC-6E0F8091AC Re-uploading, mirroring or re-hosting this file on any other website or domain is unauthorised and traceable. Licensed for hosting on papacambridge.com only. PapaCambridge Downloaded from PapaCambridge - https://papacambridge.com/ 2(c) Prepare the trading section of the statement of profit or loss for the year ended 5 31 December 2025. Naila Statement of profit and loss for the year ended 31 December 2024 (trading section) $ $ Revenue 288 000 (1) Cost of sales Opening inventory 19 600 Purchases 189 600 (1) 209 200 Closing inventory W1 (22 000) (1) 187 200 (1) OF Gross profit 100 800 (1) OF W1 Closing inventory Average inventory = $187 200/9 = $20 800 Closing inventory = $41 600 – $19 600 = $22 000 2(d) Advise Naila whether or not she should go ahead with her proposal. Justify your 5 answer by considering the advantages and disadvantages of the proposal. Advantages (Max 3) Will increase rate of inventory turnover (1) Reduce storage costs (1) Less chance of wastage/spoilage (1) Goods are sold faster so will improve liquidity/cash flow (1) Attract new customers (1) Disadvantages (Max 3) Possible loss of customers for the slow-selling lines (1) Loss of these customers could reduce sales on other lines (1) Decrease in profits resulting from loss of sales (1) Decision supported with a comment (1) Accept other valid responses Trace ID: PC-6E0F8091AC Re-uploading, mirroring or re-hosting this file on any other website or domain is unauthorised and traceable. Licensed for hosting on papacambridge.com only. PapaCambridge Downloaded from PapaCambridge - https://papacambridge.com/

Mark scheme

3(a) Calculate the revised profit for the year ended 31 December 2025. 4 $ Draft profit for the year 58 600 Add correction of allowance for irrecoverable debts 400 (1) May be shown as 300 + 100 Add depreciation W1 10 000 (1) Less tax on profit for the year (11 700) (1) Revised profit for the year 57 300 (1) W1 Plant and equipment carrying amount before incorrect depreciation charge: $160 000 × 5/4 = $200 000; correct depreciation charge is 15% × $200 000 = $30 000; correction is $10 000 3(b) Calculate the revised balance of retained earnings for the year ended 31 3 December 2025. $ Retained earnings at 1 January 2025 157 200 Less bonus issue W1 (125 000) (1) Add revised profit for the year from 3a) 57 300 (1) OF Retained earnings at 31 December 2025 89 500 (1) OF W1 Bonus issue: 1 800 000 × 2/3 shares at $0.25 each = $300 000 Transfer from retained earnings = $300 000 – share premium 175 000 = $125 000 Alternative approach Bonus issue 125 000 (1) Balance b/d 157 200 Profit for the year 57 300 (1) OF Balance c/d 89 500 (1)OF 214 500 214 500 Trace ID: PC-6E0F8091AC Re-uploading, mirroring or re-hosting this file on any other website or domain is unauthorised and traceable. Licensed for hosting on papacambridge.com only. PapaCambridge Downloaded from PapaCambridge - https://papacambridge.com/ 3(c) Prepare the statement of financial position at 31 December 2025. 8 J Limited Statement of financial position at 31 December 2025 $ Assets Non-current assets Property at valuation 736 000 Plant and equipment at carrying value 170 000 (1) 906 000 Current assets Inventory 51 800 Trade and other receivables 53 800 (1) Cash and cash equivalents 28 700 134 300 Total assets 1 040 300 (1) OF Equity and liabilities Equity Share capital 750 000 (1) Revaluation reserve 65 000 Retained earnings from 3(b) 89 500 (1) OF Total equity 904 500 Current liabilities (8%) Debentures 90 000 (1) Trade and other payables 34 100 Tax/taxation (payable) 11 700 (1) Total liabilities 135 800 Total equity and liabilities 1 040 300 (1) OF Trace ID: PC-6E0F8091AC Re-uploading, mirroring or re-hosting this file on any other website or domain is unauthorised and traceable. Licensed for hosting on papacambridge.com only. PapaCambridge Downloaded from PapaCambridge - https://papacambridge.com/

Mark scheme

4(a) Complete the table to show the apportionment of overheads and the 7 reapportionment of service department overheads. Production Service departments departments Total Baking Packaging Stores Canteen $ $ $ $ $ Overheads 34 500 17 300 8 200 3 900 5 100 allocated Depreciation of 18 700 11 000 4 400 1 100 2 200 (1) row machinery Power 4 800 2 880 768 192 960 (1) row Rent 11 000 5 940 3 080 880 1 100 (1) row Total 69 000 37 120 16 448 6 072 9 360 Reapportionme 2 024 2 530 (6 072) 1 518 (1) OF nt Stores row department Subtotal 39 144 18 978 – 10 878 Reapportionme 7 615 3 263 (10 878) (1) OF nt row Canteen department Total 46 759 22 241 – – (1) OF (1) OF 4(b) Calculate, to two decimal places, the overhead absorption rates for each of the 4 two production departments. Baking department $46 759/5800 = $8.06 (1) OF per machine hour (1) From 4(a) Packaging department $22 241/820 = $27.12 (1) OF per labour hour (1) From 4(a) 4(c) State two reasons why overheads could be over-absorbed in the packaging 2 department. If actual overheads are less than budgeted overheads (1) If actual production is greater than budgeted production (1) Trace ID: PC-6E0F8091AC Re-uploading, mirroring or re-hosting this file on any other website or domain is unauthorised and traceable. Licensed for hosting on papacambridge.com only. PapaCambridge Downloaded from PapaCambridge - https://papacambridge.com/ 4(d) Calculate the selling price of the order. 6 $ Direct materials 31.00 } Direct labour: Baking department ($11.50 × 8.5) 97.75} (1) Direct labour: Packaging department ($11.50 × 40.25} 3.5) Overheads: Baking department ($8.06 × 9.5) from 76.57 (1) OF 4b) Overheads: Packaging department ($27.12 × 3.5) 94.92 (1) OF from 4b) Total cost 340.49 (1) OF Add profit 340.49 (1) OF Total selling price 680.98 (1) OF * $169 = (1) for combined direct materials and labour. 4(e) Advise the directors whether or not this order should be accepted. Justify your 5 answer by considering the advantages and disadvantages of accepting the order. Calculations are not required. For (Max 3) Could make use of future spare capacity helping to retain direct labour (1) May lead to future orders (1) Against (Max 3) Currently at full capacity so will have to let down other customers (1) Regular customers may hear of reduced price and request the same (1) Will workforce be available for overtime? (1) Will potential overtime costs make the order unprofitable? (1) Decrease in current (gross) profit margin (1) Prediction of reduced demand may be wrong (1) Decision supported with a comment (1) Accept other valid responses Trace ID: PC-6E0F8091AC Re-uploading, mirroring or re-hosting this file on any other website or domain is unauthorised and traceable. Licensed for hosting on papacambridge.com only. PapaCambridge Downloaded from PapaCambridge - https://papacambridge.com/ 4(f) State two features of the AVCO method of inventory valuation. 2 Avoids inequality of identical items being charged to different jobs at different prices (1) Smooths out changes in cost (1) Recognises that identical items purchased at different times and prices have identical values (1) A new average value is calculated every time a new purchase of inventory is made (1) May not represent any price actually paid for inventory (1) Max 2 Accept other valid responses 4(g) Explain one advantage and one disadvantage of the JIT system of inventory 4 management. Advantages (Max 2 marks) Reduces the need to hold large quantities of inventory (1) resulting in reduced storage costs (1) Less cash is tied up in inventory (1) this could then mean cash can be used for other opportunities (1) Less inventory stolen/damaged (1) which lowers wastage costs/improves profit margins (1) Inventory is always available when required (1) preventing holdups in production (1) can react fast to changes in consumer tastes (1) which helps increase revenue (1) Disadvantages (Max 2 marks) Requires a reliable supply chain (1) to avoid stockouts/delays in production (1) Requires proper operations management (1) to identify which components are required and at what time (1) Unexpected orders cannot be met (1) as materials aren’t in storage/lose out on sales/ revenue (1) Delivery/admin costs may be higher (1) due to increased amount of orders placed (1) Miss out on economies of scale/bulk buying/discounts (1) which will lead to higher average costs (1) Accept other valid responses Trace ID: PC-6E0F8091AC Re-uploading, mirroring or re-hosting this file on any other website or domain is unauthorised and traceable. Licensed for hosting on papacambridge.com only. PapaCambridge Downloaded from PapaCambridge - https://papacambridge.com/